I agree. They made no provisions to protect their property, other than insure it. The insurance company should pay for it, as that is what insurance is for. If the insurance company has language in their insurance policy specifically stating they won't be responsible under these types of circumstances, then it should fall on the City.
Little secret about P&C insurance (may not be applicable today), they indemnify. They in turn can demand indemnification from the second party. And they can indemnify party #1 by paying for a lawsuit against party #2. They don’t need to mention their name as the suing party. So they can first tell the city to seek indemnification from the second party and promise a lawsuit, and pull out at the last minute and straight out indemnify the first party.
In this case the insurance company may be asking party #1 to sue in hopes they get a deal, but likely will not continue the lawsuit (ill advised) because it wasn’t a wanton act and the first party did nothing to secure it.
Same as stores with “you break it you buy it”. If your jacket or kids elbow knocks something off a table and it breaks you will not have to pay for it despite demands from the store. The court will look at it as the “cost of doing business”.
The insco will pay, then subrogate and sue the family. And there will be a great comparative causation defense for the family. Who puts an unstable, expensive piece of artwork where a kid can get at it?